NEW DELHI: Reliance Industries on Friday said that it is adapting its refinery operations to meet the US sanction on Rosneft and Lukoil – the largest exporters of Russian crude. However, Washington’s latest offensive will not pinch fuel consumers for now as state-run refiner-retailers will absorb the impact of finding replacement supplies at market rates amid rising benchmarks.The refiners are assessing the OFAC (US Office of Foreign Assets Control) notification’s implications, especially on payment channels, and other compliance requirements. Simultaneously, they are also gearing up to prepare their refineries for life without Russian crude after the Nov 21 cut-off date.In its first official statement, Reliance Industries on Friday said it is adapting its refinery operation to meet compliance requirements of applicable sanctions and regulations, including European Union curbs on importing refined products into Europe and any “govt guidance”.“As is customary in the industry, supply contracts evolve to reflect changing market and regulatory conditions. Reliance will address these conditions while maintaining the relationships with its suppliers,” the company said indirectly referring to its term contract for 500,000 barrels per day of crude with Rosneft.“Reliance is confident that its time-tested, diversified crude sourcing strategy will continue to ensure stability and reliability in its refinery operations for meeting the domestic and export requirements, including to Europe,” it said.
RIL Says It Will Adapt Refinery Operations
The sanctioned companies together export 3-4 million barrels per day of oil. The prospect of 3%-4% of global daily supply going off the market pushed up oil prices for the second day. Benchmark Brent crude topped $66 on Friday after a 5% rally on Thursday.So far this year, 34% of India’s crude has been from Russia. Rosneft and Lukoil accounted for nearly 60% of this. A senior executive of IndianOil, the largest consumer of Russian oil among state-run refiners, said finding replacement will not be too difficult from West Asia or other geographies such as Africa and the US. “But everyone else will also tap the same sources, pushing up oil prices and premia on other crude. This will impact margins which can be managed if oil prices do not top $70,” he said.ICRA estimates replacement supplies at market prices would push up oil import bill by 2%, impacting macro-economic parameters. The refiners are pinning their hope on Russian oil’s propensity to ultimately find its way into the market. Though EU curbs have chipped away at Russia’s vast and elusive shadow fleet of tankers, but it can still push significant quantities of oil into the market. Moscow is also likely to find a workaround with new intermediaries and transshipment to delink supplies from Rosneft and Lukoil, limiting the outage and calming prices.But much will depend on how strictly the US treasury enforces the sanctions.
